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To: Proud_Infidel who wrote (47990)	6/15/2001 11:38:47 AM
From: Proud_Infidel	Respond to of 70976

UMC warns of operating loss, mid-40% foundry utilization in Q2 Foundry supplier says third-quarter results could also be sequentially lower Semiconductor Business News (06/15/01 08:21 a.m. EST) TAIPEI, Taiwan - The world's second largest silicon foundry company--United Microelectronics Corp.--today warned it will post an operating loss for the second quarter because the semiconductor downturn has driven its wafer fab utilization to the mid-40% range from about 70% in the prior quarter. UMC here also said it now expects a 35% sequential drop in revenues in the second quarter from NT$23.59 billion ($718 million) in the first three months of this year. Two months ago, the silicon foundry company had predicted that the downturn would cause Q2 revenues to fall 30% from the first quarter and that a fab capacity utilization could drop to as low as 50%. But weaker-than-expected foundry demand has caused UMC to cut its forecast, and warn that the third quarter could also be weaker than Q2 despite hopes for a second-half recovery in 2001. "The second quarter reflected the deteriorating economic environment as well as the harsh end market inventory correction," said Peter Chang, chief executive officer of UMC. "The lack of demand and continued inventory adjustment by our customers are impacting UMC's business as well as its future outlook. "At this time, it is difficult to anticipate results for the upcoming third quarter. Visibility remains extremely low and we do not see signposts toward improvement in the demand/inventory situation," he warned. "Accordingly, we cannot rule out the possibility that business condition in Q3 may show further deterioration from that of Q2." The CEO said additional cost-cuts are being planned at the foundry, but no details were released about those potential moves. While releasing its first-quarter results, UMC said it was holding steady with its plans for $1.5 billion in capital spending (see April 30 story), but industry sources believe the company's budget will be trimmed. A major question, however, is whether the sharp downturn in foundry sales will slow any of UMC's 300-mm fab projects from ramping into volume production later this year. Two months ago UMC's projections show its 300-mm capacity ramping into volume production in the fourth quarter, with two new plants--Fab 12A in Taiwan and joint-venture Trecenti (with Hitachi Ltd.) in Japan--accounting for 100,000 "eight-inch equivalent" wafers at the end of Q4 2001. Analysts tracking the troubled silicon foundry business have recently cut their forecasts for total revenues after lowering projection several times since the start of 2001. A recently revised forecast from Semico Research Co. in Phoenix now shows foundry revenues falling 4% in 2001 even if a recovery takes shape in the second half of the year (see June 1 story). Other research firms are not as optimistic about the year for struggling foundry suppliers and have cut revenue forecasts to show a 10-to-20% drop from last year. UMC's drop in fab utilization is not as steep as some of its rivals. Last month, Chartered Semiconductor Manufacturing Pte. Ltd. in Singapore--the world's third largest pure-play foundry supplier--warned investors that its factory utilization rate could drop to one-third the installed capacity during the second quarter (see May 21 story). Chartered too is predicting a loss for the second quarter, but it is also pushing ahead with its 300-mm fab, which is slated to start producing silicon devices next year (see May 22 story). Meanwhile, the world's largest foundry supplier--Taiwan Semiconductor Manufacturing Co. Ltd.--has not yet issued a new guidance for the second quarter or second half of 2001. Last week, TSMC said it still believed the foundry slump would hit its bottom in the second quarter after reporting a 7.4% sequential drop in revenues for May compared to the prior month (see June 8 story).